Chesapeake faces criminal Clean Water Act probe

March 2, 2012 by Ken Ward Jr.

West Virginia media outlets are focusing in this morning on a report out of Oklahoma about Chesapeake Energy facing a criminal investigation of Clean Water Act violations at some of its operations here in West Virginia.

The Oklahoman reported today:

Chesapeake Energy Corp. is facing possible criminal charges as the U.S. Department of Justice investigates whether the oil and natural gas producer violated the Clean Water Act in West Virginia.

Chesapeake is cooperating with the investigation, which it disclosed this week in a regulatory filing. “We are working with the government to resolve potential violations at three sites in Marshall and Wetzel counties,” spokesman Michael D. Kehs said Thursday. “These actions occurred primarily in 2008 and 2009, and are related to road maintenance and pond construction,” he said. “Because an investigation is ongoing, it would be inappropriate to offer further public comment at this time.”

The paper picked up on information Chesapeake disclosed on Wednesday in its annual report to stockholders and the U.S. Securities and Exchange Commission. That disclosure reported it this way:

There are also outstanding orders for compliance initiated in the 2010 fourth quarter by the U.S. Environmental Protection Agency (EPA) related to our compliance with Clean Water Act (CWA) permitting requirements in West Virginia. We have responded to all pending orders and are actively working with the EPA to resolve these matters. For four of the sites subject to EPA orders for compliance, we have received and have responded to a subpoena requesting documents issued by the grand jury of the U.S. District Court for the Northern District of West Virginia. We understand that the U.S. Department of Justice (DOJ) is investigating possible criminal violations of and liabilities under the CWA with respect to three of the four sites. We are cooperating with the DOJ’s investigation. The CWA provides authority for significant civil and criminal penalties for the placement of fill in a jurisdictional stream or wetland without a permit from the Army Corps of Engineers. CWA civil penalties can be as high as $37,500 per day, per violation, and possible criminal penalties range from $2,500 to $25,000 per day, per violation, for misdemeanor liability (i.e., criminally negligent conduct) and from $5,000 to $50,000 per day, per violation, for felony liability (i.e., knowing conduct). The CWA sets forth subjective criteria, including degree of fault and history of prior violations, that influence CWA penalty assessments, and the EPA may also seek to recover the economic benefit derived from non-compliance.

Chesapeake added:

The duration and outcome of the DOJ’s investigation are uncertain and the status of the investigation and our assessment of its potential impact may change as the investigation unfolds on a timetable that we cannot confidently predict and that may be affected by developments over the next few quarters. We believe that resolution of the EPA’s compliance orders and the DOJ’s investigation will each include monetary sanctions exceeding $100,000 but are unable to estimate the amount of any fines that might be imposed in these matters.

Previously, we’ve discussed the reporting by the AP’s Vicki Smith about these issues:

The Environmental Protection Agency says a subsidiary of Chesapeake Energy has promised to restore four northern West Virginia streams it filled illegally while building roads and laying pipeline for Marcellus shale gas drilling projects.

EPA spokeswoman Donna Heron confirmed Monday that federal inspectors cited Chesapeake Appalachia LLC after four site visits this fall in Wetzel and Marshall counties. In one case, inspectors found that Blake Fork stream and a picturesque waterfall near New Martinsville had been completely filled with gravel for a road.

Ed Wade, who took before and after photographs of the 20-foot wide stream, said many people used to visit the waterfall because of its beauty.

“I don’t know if there was a miscommunication about where the road should go or what,” he said, “but they just took their dozers and ripped it out.”

Blake Fork and three other streams affected by Chesapeake’s drilling activities are tributaries of Fish Creek, which flows into the Ohio River.

Interestingly, my friend Jeff Goodell has a new piece out in Rolling Stone about Chesapeake and its outspoken CEO, in which he reports:

Aubrey McClendon, America’s second-largest producer of natural gas, has never been afraid of a fight. He has become a billionaire by directing his company, Chesapeake Energy, to blast apart gas-soaked rocks a mile underground and pump the fuel to the surface. “We’re the biggest frackers in the world,” he declares proudly over a $400 bottle of French Bordeaux at a restaurant he co-owns in his hometown of Oklahoma City. “We frack all the time. What’s the big deal?”

McClendon dominates America’s supply of natural gas the same way the Tea Party-financing Koch brothers control the nation’s pipelines and refineries. Like them, McClendon is an influential right-wing power broker – he helped fund the Swift Boat attacks against John Kerry in 2004, donated $250,000 to the presidential campaign of Rick Perry, and contributed more than $500,000 to stop gay marriage. But unlike his fellow energy czars, McClendon knows how to tone down his politics and present a friendlier, less ideological face to the public. He secretly gave $26 million to the Sierra Club to fight Big Coal, and built a Google-like campus for Chesapeake’s 4,600 employees in Oklahoma City, complete with a 63,000-square-foot day care center, a luxurious gym and four cafes manned by cook-to-order chefs. He even voted for Barack Obama because he thought the country needed “an inspirational figure.”

At 52, McClendon still looks like the whip-smart accountant he once aspired to be – crisp white shirt, polished shoes, a toss of white hair. To hear him tell it, the cleaner-than-coal fuel he produces will revive our faltering economy, free us from the tyranny of foreign oil and save the planet from global warming. “I have a fossil fuel that makes other fossil fuels obsolete,” he boasts. By McClendon’s estimate, the industry has drilled more than 1.2 million wells nationwide, yet so far there have been only a few confirmed cases where things have gone wrong – despite dire warnings from scientists and environmentalists that fracking pollutes rivers and streams, contaminates drinking water and turns large swaths of farmland into industrial moonscapes. “Where is the mushroom cloud?” McClendon asks. “Where are the dogs with one leg? Where are the people that have been maimed or hurt?”

Jeff concludes:

Much of what McClendon says is misleading – wind power is as cheap as gas in some places and falling fast, and cutting back on gas doesn’t have to mean burning more coal. But his plan is clear. He’s not going to back off until every last square foot of shale rock in America is drilled and fracked and sucked clean of gas. McClendon may rely on sophisticated new drilling technologies, but at heart, he’s driven by the same dream of endless extraction that has gripped oil barons and coal companies since the dawn of the Industrial Revolution. In the end, all his talk of energy independence and a cleaner, brighter future boils down to a single demand, as simple as it is disastrous: Drill, baby, drill.

One Response to “Chesapeake faces criminal Clean Water Act probe”

  1. Frank says:

    This is the same Aubrey McClendon who threw a hissy fit and cancelled plans for a regional Chesapeake Energy headquarters near Charleston because a Roane County jury returned a multi-million dollar verdict against Chesapeake after it swindled West Virginia mineral owners out of tens of million$ in royalty payments.

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